Chapter 10, Problem 10.8P

Lower of Cost or Market. Framingdale Factories. Inc. manufactures low-cost furniture. The company produces three sizes of wardrobes 4 foot (S). 6 foot (M). and 8 foot (L). Framingdale provided the following data.

Description	4 Foot(S)	6 Foot (M)	8 Foot (L)
Selling price	$100	$120	$145
FIFO cost	84	94	150
Current replacement cost	72	88	125
Disposal cost	22	25	20
Normal profit (% of selling price)	20%	25%	30%
Units in ending inventory	1,000	2,100	900

Required

1. a. Determine the inventory carrying value with the lower-of-cost-or-market rule using the individual-item basis.
2. b. Prepare the journal entry to record any write-down required using the indirect method.
3. c. Determine the inventory carrying value with the lower-of-cost-or-market rule using the total inventory basis.
4. d. Prepare the journal entry to record any write-down using the direct method.